Property and Casualty Insurance Resources for Florida Residents
Thursday, August 14, 2014
Personal Property Replacement Cost: Do You Need It?
Almost every type of building insurance policy includes some coverage for Personal Property (also called ‘contents’ or ‘belongings’). Simply put, this coverage applied to everything that would fall out if you turn the house upside-down and shake it. Furniture, appliances, electronics, clothing, household items, carpeting and art are all examples of personal property. You have the option to ensure your personal property at actual cash value (ACV) or replacement cost (RC).
ACV coverage includes depreciation. It’s the amount you might collect if you sold the item on ebay or in a garage sale, and it won’t be enough to purchase a brand-new version of the item. Different classes of personal property are depreciated differently, but you should expect to receive a modest amount per item.
RC coverage does not include depreciation. It provides enough money to purchase the same item (or whatever is comparable in today’s market) brand-new.
The difference in premium between these two loss valuations can be substantial. If your home is furnished with garage sale or hand-me-down items, ACV coverage on personal property might make sense for you. If your home is furnished with items that you purchased new, you should consider insuring those items for their full replacement cost.
However you insure your belongings, it is important to create a photo or video inventory. Take pictures of the inside of your home, and store the pictures off-site or online to keep them safe in case of a loss. You’ll be very glad that you did.
Certain classes of personal property (jewelry, fine arts, furs, etc) have a maximum coverage limit, even when insured for replacement cost. These types of items should be insured separately on their own policy. Not only will this ensure that you have enough coverage, but it will eliminate deductibles and most of the exclusions found in a homeowners policy. Any claims that you make on a stand-alone property policy also won’t count against your claim history.